Origin Energy ships first cargo from APLNG plant in Gladstone

The depressed oil price has muted celebrations for the departure of the maiden cargo from Origin Energy's $24.7 billion Australia Pacific Liquefied Natural Gas project in Gladstone, given that the project does not cover its operational and financing costs at current prices.

The Methane Spirit tanker carrying the first cargo left Curtis Island in Gladstone harbour on Saturday, just over 12 months since the first LNG shipment left Gladstone, from BG Group's Queensland Curtis project which lies at an adjacent site on the island.

Managing director Grant King described the first cargo as "a landmark moment" in the history of Origin, which is partnered in APLNG by US major ConocoPhillips and China's Sinopec, the biggest customer for the project. Some cargoes will also go to Japan's Kansai Electric.

He underlined the long-term nature of the project, which means it has decades in order to prove its worth as a financial investment for Origin.

"LNG plants have a long operational life and Australia Pacific LNG is expected to deliver a significant amount of earnings to Origin," Mr King said.

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APLNG needs $54 to $57 a barrel, or $US38-$US42, before it yields any distributions for Origin above operating and financing costs, the company has said. Brent oil prices closed well below that level at $US33.55 a barrel on Friday.

The first cargo is not being shipped to Sinopec, which is feeling the effects of disappointing gas demand growth in China and is said to be seeking to re-sell cargoes it has committed to buying from Australia.

All three LNG projects in Gladstone, the first in the world to manufacture LNG from coal seam gas rather than conventional gas, are now operational, including two production units at BG's QCLNG, and one unit at each of Santos's $US18.5 billion GLNG venture and at APLNG. Both GLNG and APLNG are due to begin production from a second LNG train at their respective sites this year.

Alasdair Cathcart, general manager of LNG at Bechtel, the US engineering firm that built all three of the Curtis Island plants, said the simultaneous work "constitutes the greatest concentration of greenfields construction for Bechtel anywhere in the world".

Over the next for years, about $1.2 billion is expected to flow in royalty payments for Queensland for spending on public services such as schools, said Malcolm Roberts, head of the Australian oil industry peak body APPEA.